A Tax Cut They Don’t Like

These guys are just going all-in on the class warfare:

News flash: Congressional Republicans want to raise your taxes. Impossible, right? GOP lawmakers are so virulently anti-tax, surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?

Apparently not.

Many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different “temporary” tax cut should end as planned. By their own definition, that amounts to a tax increase.

The tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a “payroll tax” on practically every dime they earn.

There are other differences as well, and Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy.

“It’s always a net positive to let taxpayers keep more of what they earn,” says Rep. Jeb Hensarling, “but not all tax relief is created equal for the purposes of helping to get the economy moving again.” The Texas lawmaker is on the House GOP leadership team.

He’s right. The payroll tax is far more effective at stimulating the economy than giving the Koch brothers and the Wall Street money boys more money to buy another yacht.

This is all about making sure the economy is as bad as possible for 2012, protecting the rich, and making sure the Republicans can pretend they are the party of “fiscal responsibility.”

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Red State Welfare Queens

This map and accompanying discussion (via) should be more widely disseminated. As Kevin Drum notes, rural life is more expensive, and it is subsidized by city dwellers. Rural state Republicans used to know this, so they would often vote for pork-barreling blue dogs who were perceived as more effective in bringing home far more than their fair share of tax dollars. But in the past few years, they started to believe the Tea Party line that they were the last real Americans laboring under the oppressive yoke of elite urban taxation. They aren’t, and they ought to be reminded of that. When you have to start driving 20 miles to get to the Post Office, or a couple of hundred to get to the airport, then voters might start remembering who brings home the subsidies that allow unprofitable postal and air service.

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Who’s Taxing Whom?

Fair warning: what follows is a bit of a rant and contains nothing particularly new.  But the fiscal follies of our overlords are unhinging me, and as misery loves company, I hope to share my derangement.
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I’ve been a little obsessed with light bulbs lately, as regular readers know.  I  continue to be dumbfounded at the depth, passion, and naked-mole-rat-stupidity of the GOP drive to ensure Americans waste money on illumination.  Following a thought from one commenter, I’m bracing for the claim that bans on whaling are really an unconscionable assault on the liberty of the people to light their homes with oil lanterns.

But as I thought about the implications of the Republican House caucus’ relentless drive to undermine America’s energy security, I started to fixate on a penetrating glimpse of the obvious:  the entire GOP approach to the federal government’s fiscal policy is a vast tax hike on most Americans.

That the GOPsters approach to policy will raise the cost of living in America is, I think obvious by this point:  when you privatize public goods, by and large those goods cost more for the individual user to access.  (There is a lot of detail obscured by that blanket statement, and certainly some instances where it might be otherwise, but the health care system (about which more below) is a familiar example of the basic problem, and there are many more.)

Republicans would say, I think, that cost isn’t the issue.  Government shouldn’t pay for much that it does now and that individuals can make better choices about priorities and so on.  They’d add that government musn’t pay for that which it can’t; that, to use a cliche repeated over and over again, that the government must behave like any household would, and not spend money it doesn’t have.

That last is nonsense, of course.  I’m actually working on a next book that tells a grand story of fraud and deceit at the birth of the idea of government debt—and that tale turns on the ways that governments aren’t like households or small businesses.

For now, though, the point is that if you take the Republicans false metaphor at face value, then you see that despite the brave promises of “no new taxes,” the practical, household consequences of their actions add up to a huge stealth tax increase that differentially falls on to working people, the middle class, and the poor.

And yes, as noted above, I know I’m restating the obvious, but bear with me.  Let’s  take my lighting fixation for a spin.  Recall that the energy efficiency standards that so offend the current Republican caucus* are predicted to save each American household $50 a year.

Now back to that bill-paying session over the kitchen table Republicans are so wont to imagine.  More »

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In the Integer-Based Community

I’ll give that unnamed Bush staffer credit.*  It is possible to create an alternate reality—if only for a time—given the willing complicity of all those watching (and transmitting) the useful fantasies of the powerful.  Just look at the success the Koch brothers’ subsidiary political arm, aka the GOP et al. have had in persuading so many that wealth transfers to the rich are the solution to all ills.

Hence the significance Bruce Bartlett’s entry today in The New York Times Economix Blog, in which the former Reagan, Bush I, Ron Paul and Jack Kemp policy advisor writes that, in essence, the entire Republican presidential field is lying about taxes to the American people.

He doesn’t quite put it that way—but he comes pretty close:

For years, Republicans have [said] ...over and over again that taxes in the United States are exceptionally high and the primary obstacle to growth, and that a huge tax cut would do more to raise growth than any other policy.

For example, former Gov. Tim Pawlenty of Minnesota, a candidate for the Republican presidential nomination, has proposed reducing the top statutory income tax rate on individuals to 25 percent and abolishing the taxation of interest, dividends and capital gains. The Tax Policy Center estimates that this plan would reduce federal revenues by $8 trillion over the next decade.

Governor Pawlenty contends that unprecedented growth will result — to such an extent that there will actually be no revenue loss at all.

I am not picking on Governor Pawlenty; all of the candidates for the Republican presidential nomination support similar policies, and not one has criticized him for making outlandish claims.

Yup—that’s as card-carrying a GOP conservative (per commenter wvng below) stalwart as you can get, stating as fact (which it is) that the fundamental Republican position on tax policy is “outlandish.”

Now this is, or ought to be obvious.

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The Company We Keep

Looks like Sullivan isn’t the only one impressed with the “seriousness” of Ryan’s budget:

In other Palin news, it appears that Bristol Palin, who is uniquely unqualified to speak about teen pregnancy prevention issues (any one of the billion women across the planet who managed to not get pregnant as a teen would be more qualified), made a ton of money with her nonprofit. For her “labor,” she pulled in $265k, while they gave out 35k to teen pregnancy clinics. That’s probably how she was able to pay 172k in cash for a house in the Galtian paradise of Arizona. Just like average working people do every day when they buy their house with cash.

Why do I mention this? Because at $265 large, on top of all the other speakers fees and what else she “earned” last year, Bristol will be rewarded with a large tax cut under the very serious Ryan roadmap, Bristol will have a lot more money to not spend on condoms, while some poor working bastard will pay higher taxes and get kicked out of his health insurance because ACA was repealed and he has a precondition or can’t afford it on the meager vouchers he was given. The way God and serious people would want it.

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They’re Not Even That Consistent

I like the general theme of Sullivan’s bit about the meaninglessness of labels with respect to modern Republicans. However, this is simply wrong.

Income tax rates are now lower than they were under Ronald Reagan and far lower than they were under Eisenhower. And yet it has become a Norquistian non-negotiable that no taxes can be raised at all on anyone[...]

Republicans will gladly increase taxes on poor people. Republicans will annul tax credits that favor the poor even faster.

You cannot predict Republican behavior with any single principle. Full stop. For one example, take Newt Gingrich (please). Or look at the Affordable Care Act. Orrin Hatch cosponsored essentially the same bill in the 90’s and defended it until the week when Obama embraced it as a compromise plan. Now he says it is worse than Hitler. Mitt Romney implemented the plan in Massachussetts, and it’s working great! Just don’t ask Mitt to defend his greatest achievement. He won’t. As another example, take any issue that Mitt Romney ever spoke about more than once.

True, virtually everything they fight for will make the rich more secure or subdue the not-rich, but not always, and certainly not if it means that they agree with something that a Democrat proposed first.

And there, my friends, is the main difference between Republicans today and the people Sullivan used to know and love. Once upon a time the GOP would gladly cross the aisle and work with Democrats to screw the poor. Now even that exalted goal must take a backseat to petty displays of spite by loud, stupid bigots like Richard Shelby, John Kyl and Jim DeMint. What was once a genteel agreement to slowly throttle the working class has devolved into a naked gibbering scramble for the bundle of fasces, and that just won’t do.

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Grab Your Pearls and Smelling Salts

The Affordable Care Act had a provision requiring small business to issue a 1099 to every vendor with whom they spent over $600. This caused an outcry and the House passed a screwed up repeal provision, which the Senate will probably also approve.

Now that this odious regulatory burden is about to be lifted from the shoulders of small business, perhaps it’s time to mention a little fact that’s not often discussed—small businesses cheat on their taxes, a lot.

In the past few years, I’ve seen the following: A technology company owner who had his kids’ nanny on the payroll as an employee. A landlord using his business account to pay for supplies for a major home remodel. Numerous service providers who offer a discount for cash. And many, many SUV “company cars” driven by moms running errands.

There are plenty of small businessmen who pay their full honest share of taxes (I’m one of them), but let’s not pretend that the real reason that we’re repealing the 1099 provision of the ACA is “paperwork”. The ability to cheat on their taxes is just taken as a given by a lot of small businessmen. It’s sort of like the small business version of a farm subsidy.

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Another Timing Question

Here’s another timing question that Steve Benen missed. Here’s Jim DeMint just a few months ago:

“I’m doing the job South Carolinians elected me to do, which is to review each bill carefully before it is passed, not after,” DeMint told McClatchy. “Only in Washington is it a radical idea to read a bill and know how much it costs before we agree to pass it. I’m not going to sit by quietly while big spenders try to secretly ram through bills that increase the debt and expand the size of government.”

DeMint’s aides said he’s not out to block all legislation and is focused on spending measures.

How on earth could DeMint and Pence offer commentary on the Obama budget already. Have they read the bill? Have they read the entire plan they are offering? Shouldn’t they “READ THE BILL” first?

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Science Friday I: Taxes and Galtian Motion

One of the most common arguments against millionaire taxes takes a hit in the National Tax Journal [pdf]:

Drawing on the NJ-1040 microdata — a near census of top income earners — this study examines the impact of a new progressive state income tax. Do progressive state income taxes cause tax flight among the wealthy? The New Jersey millionaire tax experiment offers a potent testing ground, given the magnitude of the policy change and the relative ease of relocating to a different state tax regime without leaving the New York or Philadelphia metropolitan areas. Using a difference-in-difference estimator, we find minimal effect of the new tax on the migration of millionaires. Using the 95–99th percentiles of the income distribution as a “non-33 taxed” control group, we find that the 99th percentile (those subject to the new tax) show much the same trends in migration patterns over time. There are small subsets of the millionaire population that are more sensitive to state taxation. Nonetheless, the broad conclusion holds even when looking at the richest 0.1 percent of households.

These findings mesh well with existing research showing that the migration response to marginal tax policy changes is generally quite small. Our work also addresses the question, “are the rich different?” (Alm and Wallace, 2000), and follows the recommendations of Piketty and Saez (2003) to focus on the behavior of the top 1 percent (and even top 0.1 percent) of income earners. We conclude that, at least in terms of the migration response to state income taxes, the rich are not different — they seem to have much the same non-response as the general population.

In other words, like everyone else, the rich bitch and moan about the taxes they pay but they don’t generally move out of state. The one group that is more sensitive is the retired, but if I understand the study correctly, the outflow of the retired was compensated for by the creation of new millionaires.

I also found it interesting that there’s an established body of evidence that marginal tax rates don’t cause migration. Funny how we never hear about that when conservatives are bloviating about taxation. If anyone who knows the literature could point to a good review paper, I’d be happy to read it and post about it.

(via)

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The Republican Plan to Cut the Budget

Governating is hard:

Updating their budget estimates, House Republicans conceded Thursday that their best hope is to cut current appropriations by $32 billion for the remainder of this fiscal year, once new spending for defense and other security needs are added to the equation.

The impact on domestic spending and foreign aid programs would still be very severe, with the GOP seeking an immediate $58 billion cut from President Barack Obama’s once expansive 2011 budget. But with the Congressional Budget Office predicting a nearly $1.5 trillion deficit for the current year, the scaled-back estimates reflect the limits of a budget strategy so focused narrowly on one segment of appropriations.

As outlined by leadership and House Budget Committee staff, the new cap on appropriations will set a 2011 ceiling of $1.055 trillion—$32 billion less than the latest estimate by CBO of the full-year of the stop gap spending bill due to expire Mar. 4.

Most simply, domestic and foreign aid programs would be cut to $420 billion or about $40 billion below the levels now. But an additional $8 billion would be added for defense and security needs, even after making reductions from Obama’s Pentagon request.

This could accurately be summarized as “Yes, I had two double-bacon cheeseburgers with extra mayo and a large order of fries with gravy, but I would like to note my beverage was a diet coke.”

If you are not going to raise taxes and seriously cut defense spending, you aren’t serious.

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Fiscal Conservatism, Tea Party Edition

I’m sure Captain Ed will be furious about this:

Republicans’ deficit reduction platform, which may have helped catapult them into the majority, is about to run headlong into a hard reality: Many of their key policy goals will increase the deficit dramatically.

To get around this fact, they’ve included measures in their new rules package to exempt some of their biggest legislative priorities from deficit consideration. Among the exceptions, which the House is likely to consider in the 112th Congress, are the health care repeal bill (scheduled for a vote a week from Wednesday), the 2001 and 2003 Bush tax cuts, an AMT patch, extending the estate tax, and more.

You can read more about the health care repeal side of this here. And more about the GOP’s Calvinball rules here.

The health care law, according to the Congressional Budget Office, will reduce the deficit by $143 billion through the end of the decade, and more so in the decade after that. Thus, repealing the law will blow a similarly sized hole in the deficit.

Republicans wave this off.

Shorter Republican Party- “We’re so full of shit and you guys keep buying it. Why should we change? Look- Obama’s a Muslim! Deficit! Terrorist! Young Bucks and T-Bones! War on Christmas!”

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No Deliberation

The most deliberative body in the world listened to Bernie Sanders for close to two days, and then decided to completely and totally ignore him:

The Senate on Monday advanced the tax-cut package agreed to between President Obama and congressional Republicans, virtually assuring that the Senate will approve the bill on Tuesday and send it to the House, where Democrats are threatening to make changes to a provision granting a generous tax exemption to wealthy estates.

The vote in the Senate was not finished, but shortly after 4 p.m. the tally showed more than 60 senators agreeing to end debate, cut off any filibuster and move to a vote on passage.

The majority leader, Harry Reid of Nevada, had agreed to keep the vote open far longer than usual to allow lawmakers returning to Washington from the West Coast to make it back to the Capitol.

Shortly after 4:30 p.m., the vote tally was 69 to 10, with eight Democrats, one Republican, Senator John Ensign of Nevada, and one independent, Senator Bernard Sanders, of Vermont, in opposition.

The final tally was 83 to 15. Forty-five Democrats and 37 Republicans supported moving the measure ahead; opposing votes came from nine Democrats, five Republicans and one independent, Bernard Sanders of Vermont.

Forty-Five Senate Democrats supported the bill. I’m sure this won’t stop people from magically thinking that there was some really progressive bill that would have not only not been blocked by the GOP but received enough support from the Democrats to pass cloture. At some point, people are going to realize that not only is the Senate broken procedurally, but that a lot of Senators talk out both sides of their mouth and hide behind those procedural rules to support the money party. And yet today, people are still insisting in the comments below that the PO would pass. It’s just delusional thinking. Folks- there is no bigger group of liars than members of the Senate, and they don’t care if they pit you and me against each other, as long as they serve the folks who donate to them and who will hire them as “consultants” when they retire. See Daschle, Tom.

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The Deal

According to the Great Orange Satan, here is the tax cut deal:

According to reports from ABC’s Jake Tapper, New York Times and CNN, the package would extend Bush tax policy for two years, replace the tax credits in the Obama stimulus package with a payroll tax holiday, extend unemployment insurance for thirteen months, extend the estate tax at 35% for two years, and extend $40 billion in tax credits to the working poor.

As much as I hate to say it, if they can get 13 months of unemployment benefits, I’d take it. I figgered the most they would get would be six months. Thirteen months might save a lot of families. As bad a policy as I think the tax cuts for the rich are, thirteen months of keeping people from the brink of disaster is a mighty good sweetener.

D-Day, whose analysis I always trust, says that it is a horrible deal. says the Estate Tax portion is a horrible deal. I misread him initially. Sorry.

I just hate the fact that what we might have to do to keep the poorest of the poor afloat is toss out tons of cash to the already rich. God, I hate Republicans.

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I Don’t Think Holding the Line on Marginal Tax Rates Will Cut it With this Crowd

I’m wondering how the corporate/libertarian wing of the GOP placate social conservatives this time, and what that means in terms of attracting Independents:

Social issues barely rated in this year’s economy-centric midterm elections. More than six in 10 voters who cast ballots on Election Day cited the economic downturn as their top concern, according to exit polls. But major GOP gains in state legislatures across the country – where policy on social issues is often set – left cultural conservatives newly empowered. Opponents of same-sex marriage, for instance, now see an opportunity to block or even reverse recent gains by gay rights advocates in Minnesota and New Hampshire.

If you believe, as I do, that the Tea Party was packaged and sold by corporate interests to serve a very narrow agenda that consists of low tax rates for wealthy people and no regulation, they’re going to have a real problem with the base if they don’t focus on social issues.

“Americans voted overwhelmingly for both social and fiscal conservatives, and it would be unwise to throw social policies to the wayside and snub the voters who sent a strong message to the new Congress that they want both pro-life and fiscally conservative policies. In our post-election poll, when asked to name the biggest issue facing future generations, 62 percent of voters said it is the moral decline of our nation.”

And then there’s this:

Two-thirds of the Republican wins came in districts where the percentage of people classified as rural was greater than average. Democrats saw many of their small-town icons retire or go down in defeat, along with younger members who had been renewing the party’s appeal in the hinterland. The few rural Democrats who remain will face another tough election in 2012. Rural America has long been associated with conservatism. Small towns tend to be older and whiter, and they often have more military veterans. Those are all groups that lean Republican.

NPR missed part of the story. They’re not just older and whiter. Social conservatives came out, and opposing abortion rights and marriage equality are going to be huge for them, as always.

It is absolutely central to the social conservative voter’s self-image that they be fighting to defend something Big and Worthy and Righteous, and tax cuts and the inherent beauty of the corporate form aren’t going to cut it.

They need issues like LIFE or MARRIAGE or FAMILY, or they sit it out. They haven’t miraculously turned into glib, ironic, pot-smoking libertarian-types, despite the Koch propaganda and Grover Norquist’s fantasies. That’s silly. They’re the same voters they always were.

They’re rural, they’re religious, and they’re dead-earnest.

Former President Bush gave the business/libertarian gang tax cuts galore by 2004, along with a war of choice to placate the neoconservatives. He still had to flog virulently anti-gay initiatives at the state level in crucial markets to inspire social conservatives to come out and drag him over the finish line.

Nothing’s changed on that, no matter how many times media coyly ignore the obvious.

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Here’s A Game To Play (Catfood For Everyone!)

As we all know by now, Alan (I’m so tall I don’t have to be smart) Simpson and Erskine (I was somebody once, but no one remembers) Bowles have offered up their prescription for the long term fiscal health of the nation:  feed the rich and starve everyone else….all to achieve a notionally balanced budget roughly in time for the next glaciation.

Now, in one of those occasions when the credit-where-credit-is-due button gets pushed, The New York Times comes up with something both fun and useful, a You Fix The Budget game.

It’s got huge and predictable limitations, of course, all centered around the paucity and bluntness of the options.  But still it gives a nice feel for what’s really at stake here, not to mention just how utterly focused on class warfare (on the side of uppers, of course)   the Catfood Commission chairthings find themselves.

I had a go, and got us to surplus in 2015 with a mixture of budget cuts and tax increases that included blowing away farm subsidies, reducing government contracting, whacking defense pretty good (though not every offered cut), eliminating the Bush tax cut on the over $250K crowd, but not on the rest of us.  Throw in a carbon tax and a bank tax and a couple more things and you’re there.

My approach puts the US in the black by 8 billion in 2015, essentially a rounding error of course, and left a notional 620 billion dollar deficit in 2030.  I can’t bring myself to worry too much about that, as even ten year budget projections are essentially nonsense, much less 20 year ones.

But if I did care, I could close that gap by allowing the estate tax to return to Clinton era levels, apply the payroll tax to incomes above the current threshold, take one more whack at military spending and a couple of odds and ends.

That’s enough—go have fun yourselves, and save the nation.

Just one last thought, though.  The key message of the NYT’s game is that the real budget killers we face now are military expenditures and health care costs.  Anything one can do to reduce either will have disproportionately large effects on budgets down the line.   And, to dig one layer deeper:  if the NYT is to be believed, it’s not issues of eligibility or the age at which Medicare kicks in that are the real drivers here.

Rather, the real money in health care savings in particular and deficit reduction in general comes in the tax treatment of employer benefits and, (the 900 pound gorilla in the room), in medical cost inflation.

In that context, GOP opposition (and Blue Dog enabling manouvers) to such measures as the public option; it sgrandstanding on Medicare Advantage, and the ludicrous refusal to use purchasing scale to constrain drug pricing under Medicare Part D can be seen clearly for what it is:

Proof positive, as if any more were needed, that the GOP does not care about the deficit.

Which we knew already—but this game helps dramatize.  It helps demonstrate how Republican proposals on the budget only make sense when seen as part of a long-running, and right now quite successful effort to transfer as much wealth as possible from the middle and poor to the rich.

If in the process, GOP governance bankrupts the US —that’s a feature not a bug.

My question, though, is why do they hate America so?

Image:  Francisco de Goya “Don Manuel Osorio Manrique de Zunica” c. 1792

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